The government is expected to reaffirm its commitment in the upcoming budget for the resolution of the energy crisis, which has halted economic growth in the range of 2 to 2.5 per cent.
The government is likely to announce broad parameters for resolution of the circular debt which has strained the liquidity position of the sector, according to Topline Securities analyst Nauman Khan in a research note.
In a step to revamp the sector, the government has replaced heads of eight major energy companies and cleared one-third of the circular debt recently.
Expected Measures
The government is likely to set a target of Rs90 to 100 billion collection from petroleum levy – a type of tax – for fiscal 2012, which is Rs60 to 70 billion higher than fiscal 2011 target. The collection is expected to stand in the range of Rs70 to 80 billion, according to Topline Securities.
Deemed duty, a tax collected by refineries at the time of sale, is expected to remain intact at 7.5 per cent.
The two sectors to contribute Rs350 billion to the total Rs1.9 trillion tax target of in fiscal 2012.
Neutral impact
Any change in the petroleum levy would have no implications on oil marketing companies and refineries as it is passed on, said Khan.
Refineries will continue to benefit from 7.5 per cent deemed duty protection. However, a per cent deduction will affect National Refinery earnings by five per cent and Attock Refinery’s earnings by 10 per cent in fiscal 2012.
Published in The Express Tribune, May 26th, 2011.
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